How to Increase Supply Chain Profit Margins (and why it matters)

We're sourcing products, we're introducing new products, we're seeing if they work.

Yep.

The Amazon game is always be sourcing. So we're always sourcing new products, we're always testing new products. So if our data is incorrect and we go, oh, okay, well, the margins on this product suck, let me move on to another product. But what if the margins were good, but your numbers were wrong and you made the wrong choice?

Welcome to the High Voltage Business Builders Podcast, a show where we interview high voltage entrepreneurs growing and scaling through e-commerce, real estate, and other wealth without Wall Street ventures, showing you the path to making your first or next million.

All right folks, welcome back to the High Voltage Business Builders Podcast. If you want to improve your supply chain cost of goods and of course profit margins, then pay attention to what we're about to discuss in the next 25 minutes. Because as we go through this year and into next year, 2024 to 2025, in case you didn't know where we were at, I know the whole last 3, 4 years of With everybody's brain, but just so you know, we're in 2024. We're actually coming to the end of that one surprise. I can't believe how fast this is actually moving. We're in the end of August going to September at the time of recording this, and man, the time is actually flying like crazy. Maybe it's because we have kids, dude, or maybe it's just because time is actually flying faster. I have no idea why, but I brought back Mark from Seller View to talk about those things and more, especially about getting more profit margins, better profit margins out of your product supply logistics and manufacturing process, especially going through. The next year. So how's things down in the Caymans, dude?

It's good. Nice blue skies today, as usual. Although I did just get an email that, or a text message that we have a hurricane on the way. So I—

Oh, great. That'd be fun. You and your, the giraffes behind you can hang out in the hurricane.

So yeah, no, that's good. We're, yeah, nice day down here.

Nice day. Perfect.

Okay.

Well, that's always good. I mean, it's not usually a bad day unless you get a hurricane text.

I mean, what are we, September? It kicks off like end of, end of June. So we've, so far we've had one, which was a close call, but you know, so this, it's pretty normal, right?

That's your hurricane period. Ours, ours starts closer to like May and goes through June or July, and that's our tornadoes. We get the land hurricanes to deal with here that destroy things. You get the waterspout hurricanes and the destroy winds and everything. We got kind of similar problems just at different times of the year. I don't know if you guys, we have like an underground bunker. I don't know if you guys do that? We, we fall into that storm shelter. Do you guys have anything like that there at your house?

No, no, it's just, I mean, hope for the best and get to the second floor.

You're the dude. I saw you once.

You're the guy that was in the street with the American flag, like flying.

And then as the hurricane went on, was that you?

Right. That was you on the roof, on the roof.

Even better.

Okay.

So if we're, so from SellerView's perspective and Mark, your perspective, of course, working with Amazon clients on increasing profit margins, what's something like maybe 2 or 3 things you could just give us some, you know, what to do now, what to do at the end of this year, we're headed towards fourth quarter. What should people be preparing for in supply chain and goods and optimization?

Yeah, I think when we're looking at moving forward, especially 4th quarter, is how do we get our products for the best possible cost without sacrificing time or quality? And when we think about how we do that, we've got to break it down. So we're going from the factory floor all the way to the customer's door. So as an Amazon seller, sometimes you aren't even seeing your product, right? It's going from the supplier, it's on a boat, it's hitting FBA. And we aren't kind of stepping back and going, how do I make this cost better? So obviously one would be, are we making, are we negotiating with our supplier on a, not a regular basis, but are we asking for discounts if we order more, especially fourth quarter? It's all very good with planning for fourth quarter, getting our products in for the holidays. But what if we negotiated next quarter, first quarter of 2025? And said, listen, how about I'm going to order these products now, but I'm also going to place an order for Q1, right? And can I get a discount, right? So an example of that, we had one client, I mentioned this to them, they're beginning their product for $0.76, and they're like, all right, I'm going to try it. They tried it, supplier came back and said, okay, fine, how about $0.36? So—

It hurts to ask.

Automatically a 50% Yeah, decrease right there. And then the next step is, okay, let's have a look at our supply chain. If we are ordering at the right time, we could probably possibly get it onto a boat depending on how you're shipping a container, whether you're using like AGL or something like that, get it to the warehouse in a timely manner. You're not going to spend that air freight cost. But if you are, are you getting the best possible rates? Without the guards, and then this is the time now is when it hits the warehouse. It hits Amazon. Is all your products getting charged the right amount? Are your weights and dimensions correct inside Amazon? And when you're ordering your product now, is there a way to get your packaging maybe a little bit smaller to pop you down into a lower tier? That's the basic things that I would say to our clients is like, are we fulfilling all those steps? So that when we're, whatever our cost is from the factory to the customer's door, is it the best it's going to get, the best possible quantity, but still we want to have the best possible cost on that product.

Yeah, absolutely. These are great tips for those who are really listening to this. And I know SellerView has made some changes recently to kind of help support that. Can you maybe unpack some of those things you guys are working on?

Yeah. So we just recently added a code audit tariffs. Like we've always, when I first started doing SellerView, I was actually for myself. So I wanted to always have, my goal was always to build and sell e-commerce businesses. And I was always after, am I getting the best possible cost? And how do I make it better? So I built, I originally built the tool, funny enough, for, it was like Amazon profit tool. But as I was building it, I realized that my, My cost, I was basing my cost on spreadsheets that I wouldn't say are always updated in a timely manner, and they weren't as granular as they should be. So one of the things that I've always been striving for is accuracy with the factory cost, accuracy with how you calculate your shipping. Are you, when you're shipping your goods and you get a shipping bill, are you, say you ordered 10,000 units in the container and your bill's $10,000, are you just dividing it by 10,000, 10,000, getting a dollar a unit, or are you calculating it based on the cubic meters that contain in the product and really getting granular on the size and weights of your boxes? But the other thing we realized was, are the codes that we're importing with correct? Like, are tariff codes—

Yeah.

That are getting assigned to our products correct? Because oftentimes we get, with our clients, we'll get the customs bills and we look at the bill and oftentimes a lot of products are like kind of lumped together. This has a code and the tariff code is 16% plus the 7%. This is one code and it's 25% plus those 7%. So what we want to do is have a look at those codes and make sure like that those products and those SKUs are getting assigned the right tariffs because we have found with a lot of our clients is that the lumped codes, 16%, some of the products in there should be extracted and have their own line item because those line items, those products should, some of them have been, should be netted at the 8% mark. So automatically that's an improvement on the SKU's profitability because if you're thinking your tariff is, an example, a dollar and just the example of the shipping, it's $1. Now you have an inbound cost of $2 and say you sell your product for $10, you know, that's 20%. But what if you calculated your shipping costs right and it's a 50% import and your tariff went from 16% to 8%? That's another 50% reduction. So what if your cost was really $1? So that's a 10% margin difference. That the seller can, I wouldn't say recoup, but realize when they're selling their product.

Realized gains. Yep.

Yeah. Like it's a realized gain and it makes decision process a lot better because like, especially on Amazon where we're sourcing products, we're introducing new products, we're seeing if they work. We're always, I think the Amazon game is always be sourcing. So we're always sourcing new products. We're always testing new products. So if our data is incorrect and we go, oh, okay, well, the margins on this product suck. Let me move on to another product. But what if the margins were good, but your numbers were wrong and you made the wrong choice? Yeah. So that's where—

Yeah.

And that's where you have to—

Yeah, go ahead.

Yeah.

I mean, that's where accuracy and numbers come in, making the best choice for your business versus just Making a quick snap decision because, well, one, because one, it is hard. The data isn't at your fingertips. Actually, you have to go find the data. You actually have to work to get the data. But as Amazon businesses, and I'm a seller too, I wouldn't say this is the most sexiest subject. I would much prefer PPC marketing and sourcing new products and doing all the fun things.

Oh no, but profit is always a sexy number and sexy, sexy word.

Yeah.

Yeah. But everybody always wants to talk about, you know, the fun things or quote unquote fun things to do in order to like, oh, see my ads take off and make more profit. Which is not actually how it works when you run more ads. I know people think that might be the case. Well, I'm gonna make more profit as I run more ads. We're actually gonna get more revenue. If you're not smart with these kinds of things, if you're not smart with your numbers, if you're not running the business as a business, which means we're looking for every chance to optimize a business process that leads to more efficiencies, which is exactly what you've been talking about, then you're not really running the business at its full capacity. So you're either not raising the profitability margins of the business by taking back more profit that you probably already have. You're just looking for the more sexy growth hack ways than actually running the fundamentals of the business, which is what I hear you saying.

Yeah. And like, this is the groundwork that is going to kind of explode your business, explode your growth. Because when I talk about clients, I talk about scaling your business. Like, are you scaling in the right order? Because if we're doing all the things from the factory to the customer and making sure best cost packaging's great, my cost is dialed in, my FBA rates are Spot on. Now I know what place I'm in. Now I go in and go, okay, let's optimize my listings. Let's do the things to drive more sales. Great. That's the best it's going to get there. Okay, now let's scale. Let's go to the moon. But if I go the opposite way and I go to the moon without my profit being there and my listings aren't optimized, that's where I think sellers—

Not going anywhere.

You're not going anywhere. You just, you spin your tracks. I think you always gotta scale in the right order. Otherwise, it's just a recipe for disaster.

That's exactly what we were talking about in our internal group yesterday, was when people get to this particular point of not really looking at the fundamentals and getting into the numbers and determining, okay, can I raise more on the front end with my retail price point? Can I optimize internal processes and things I'm doing with cost structures to kind of maximize profitability? And of course, on the back end, am I doing anything to negotiate discounts, pricing, And validation of products like SellerView is telling me I should, and like Mark was explaining to you, getting that more profit out of the back end in the manufacturing before you actually optimize listings and look at the opportunities for growth and PPC on the other side. And that was where we kind of caught up with that yesterday, which was you can't put more PPC down on a bad listing and see it sell more product. You're simply going to spend more dollars on marketing in the same way the business runs. You need to be smart about how you're pricing and negotiating. And I think in some cases, Mark, people just need the permission to do that. Like they don't know that's okay. And like you need the permission somehow from somebody to say, hey, go back to your manufacturer and negotiate. Well, I don't have enough units. I don't have enough business. Or maybe they don't want to. Maybe what happens if they tell me no?

Yeah, I think it's what I found is like you said earlier, you just gotta ask. If you don't ask, you don't get.

Don't get.

Yeah. And then in terms of also, yeah, yeah, there's lots of creative ways that you can, you know, talk to your supplier. I mean, one is putting a, you know, a plan together and being like, this is my ordering cycle, this is my volume of sales as I grow, you can see what's going to happen, which also can help kind of the supplier wants to know what materials they need to order in the future so they can see your trajectory. Yeah. Will they work with you? I don't know. It's just a question on your supplier. And then in terms of logistics, shipping, I think what happens also is you get comfortable with your current freight forwarder. You get comfortable with your current person you've been using. And I think it's good to have a Rolodex and get multiple quotes. I'm going to ship this container. It's going from X.

Absolutely.

Over here. What's the best possible price that you can give me? And also time, because also kind of coming back to our like MO, we want to get the cost dialed in for the best time, best quality. So we don't want to sacrifice time for something that's cheaper because then it's going to affect our cash conversion cycle. Because again, step 2 is move your inventory, move the inventory for the best possible price without overspending. So the 2 kind of play together. So we don't want to have, we don't go, okay, great. I got a container for $2,000, but it's going to take 10 weeks. I would rather spend $3,000 on a container and get it in 4 weeks. You see what I mean? So—

Absolutely.

It's good to get those quotes from freight forwarders, from shippers to go, okay, put them out. How is it going to impact my costs? And the other thing is to forecast those costs as well. And I think we noticed that over the last couple years with the container fluctuations is you get that surprise bill that you get a quote in there, but then you get a surprise shipping bill where all of a sudden the container's 10, 12, 15 grand. But what should have happened from the moment that product left its, its where, where we're shipping from is if it was gonna increase those costs per unit is we should have had a price adjustment along the way. So that when that container finally lands and we get that shipping bill, that we've recouped a little bit of that profit to account for that increase in shipping.

Yeah, no, and that's important because it really gets down to the operational controls and being efficient, being responsible for your money. When you're going to go redo your bathroom, I really hope you get 2 or 3 quotes and proposals and not just take the first one at face value. If you don't do that with the money you're running in your personal life, don't do that with the way you're running your business money, or you might find yourself with neither of each.

Yeah. Well, I think selling on Amazon now is a margin game, right? Like it's like 10 years ago, I started selling in 2013 and margins were wild. We were looking at 40, 50% without batting an eye, where now it's a margin game. Now you've got to put things in those compartments and go, okay, what's the percentage I'm getting back here? What's the percentage here? What's the percentage here? What are my business operation expenses? And how do I lower those percentages? And looking at the profit pie.

Yeah.

And going, okay, how do I lower these expenses so I can improve the margins of my business? Where I think there was like the subset of sellers who have kind of joined along the way, like the ones that were early days, looking back to the Wild West days where things just flew off the shelf and margins were amazing, where now it's more of a real business and we really got to pay attention to those factors that impact our margins.

We had— we put a lot down. You dumped a lot of information on people. You might have to go back and watch this or listen to it 3 or 4 more times, folks. Take notes, gain information. If you got any additional questions, hit up Mark at SellerView below or hit myself up at voltagedm.com. You guys go and ask questions, do the due diligence. We're here to support you. Put snide comments and remarks in the chat. I don't care either, because that'll just help us with engagement on social media and get this message out even further. And of course, like, comment, share, engage, and subscribe if anything on this resonated with you and you want to hear more of these kinds of updates or get more information from Mark. He's coming back. This is the second time we've been on our podcast, bro. And I love your updates when you come in and give us some real-world examples and details and information and actionable items. Massive. It's massive, guys. Go out and take advantage of that. Check out the show notes. Mark, thank you so much for showing up today. Big time, brother. Appreciate it.

You— this— if you're serious about building an e-commerce business starting on Amazon FBA, what if myself and my team worked with you one-on-one to execute the steps outlined in the podcast while helping you discover what the heck to sell, how to make sure it's profitable, and how to successfully launch a brand? Plus, How to do it under a consulting plus performance-driven model where I put a $10,000 skin-in-the-game guarantee for those that show up and are serious about building a real business done with us? If yes, text keyword profit to +1-417-413-4209. That's 1-417-413-4209. And I will personally respond with a few simple questions. If you're not in the US or Canada, please visit voltage dm dot com. That's voltage dm dot com. Click get started and book a no-pressure discovery call with me Or a member of my team to learn more about the Business Builders one-on-one coaching and mentoring for CEOs, entrepreneurs, and those looking to build an empire or retire using the power of e-commerce. Once again, thank you for listening, and be sure to tune in next week for a brand new episode of the High Voltage Business Builders Podcast.